Chapter 1: Exploring the World of
Business and Economics
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 1
Learning Objectives
1. Discuss what you must do to be successful in the world
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of business.
Define business and identify potential risks and rewards.
Define economics and describe the two types of economic
systems: capitalism and command economy.
Identify the ways to measure economic performance.
Examine the four different phases in the typical
business cycle.
Outline the four types of competition.
Summarize the factors that affect the business
environment and the challenges American businesses will
encounter in the future.
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 2
Tips for Studying Business
Prepare before you go to class.
2. Read the chapter.
3. Underline or highlight important concepts.
4. Take notes.
5. Apply the concepts.
6. Practice critical thinking.
7. Prepare for exams.
• These study outlines will help.
1.
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 3
Key Terms and Ideas
Define free enterprise.
Know the definition of business.
• Understand why studying business is
important.
What are the four resources that businesses
combine in order to be successful?
Know the difference between manufacturing
businesses and service businesses.
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 4
Satisfying Needs
Why do people buy goods and services?
What must businesses understand about
customer needs to help them be
successful?
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 5
Sales Revenue and Profit
What is profit?
• How is it calculated?
Know the purposes of profit.
Who/What are stakeholders?
• Know the difference between primary and
secondary stakeholders.
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 6
Types of Economic Systems
Be able to define and explain:
• Economics
• Microeconomics
• Macroeconomics
• Economy
• Factors of production
• Entrepreneur
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 7
Differences in Economic Systems
List and define principle characteristics of the
major economic systems.
How do these systems differ?
What are the four basic economic questions
that economic systems seek to address?
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 8
Capitalism
How is capitalism defined?
What does Adam Smith’s laissez-faire
capitalism have to do with modern capitalism?
What are the basic assumptions and principal
tenets of Smith’s laissez-faire capitalism?
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 9
Capitalism (cont.)
What are distinguishing characteristics of
capitalism in the United States?
What role do the following groups play in a
U.S.-style capitalist system?
• Households
• Businesses
• Governments
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 10
Types of Economic Systems
Define command economy.
• What are the two major command
economies?
• What are their key characteristics?
• How do the two command economies differ?
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 11
Measuring Economic Performance
Define productivity.
What are major economic indicators of
productivity?
• How are they calculated?
• What do they tell us about the economy?
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 12
Economic Performance: Key Terms
Be able to define and explain the significance
of:
• Gross domestic product (GDP)
• Inflation
• Deflation
• Unemployment rate
• Consumer price index (CPI)
• Producer price index (PPI)
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 13
Evaluating a Nation’s Economic Health
Why is it important to occasionally evaluate a
nation’s economic health?
Be able to define the following terms and
explain what they tell us about economic
health:
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Balance of trade
Bank credit
Corporate profits
Inflation rate
National income
New housing starts
Prime interest rate
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 14
The Business Cycle
What is the business cycle?
Define recession and depression.
What are monetary policies?
• What role does the Federal Reserve play in the
United States’ monetary policies?
Be able to define:
• Fiscal policy
• Federal deficit
• National debt
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 15
Types of Competition
What is competition?
• Know the different types of competition.
Be able to define:
• Perfect (or pure) competition
– Supply
– Demand
– Equilibrium (market) price
– Where does the equilibrium price occur on the
supply and demand curves?
• Monopolistic competition
–
What can firms do to gain a competitive
advantage in a monopolistic competition
situation?
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 16
Types of Competition (cont.)
Define and identify key characteristics of the
following types of competition:
• Oligopoly
• Monopoly
Know the difference between:
• Natural monopoly and
• Legal (limited) monopoly
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 17
American Business Today
What is a standard of living?
• How is it measured?
Know the basic stages of business
development in the United States.
Explain the differences between the four stages
of early business development:
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Barter system
Domestic system
Factory system
Specialization
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 18
American Business Today (cont.)
Know the key characteristics of business
development in the 1900s.
• How did industries change?
• Major economic events that shaped business
development and economic policy.
• Changes in the late 20th century and early 21st
century that altered standards of living and
consumption patterns.
• What is e-business and how has it changed
businesses?
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 19
American Business Today (cont.)
What are the defining issues and innovations of
the 21st century so far?
• The role played by technology
• Service businesses
Why are many pessimistic about the U.S.’s
future economic prosperity?
Be able to discuss the current business
environment.
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 1 | Slide 20
